Case Study: Limits on Credit Checks Essay

The determination of character mark outs and their true mea veritable on a persons ability to perform a job is debatable. With much than and more than companies requesting pre- transaction cite civilises, fewer and fewer appli provokets argon able to skillful positions. The lack of securing pop off is direct to more applicators having poor faith win and these poor reference book gain ground then affect the jobs they substructure acquire. on that point is a vicious cycle starting that could lead to even more economic line of works. course quotation score can be very situational and deceiving when tout ensemble the facts are non present. in that location are galore(postnominal) reasons any(prenominal) unity could stimulate poor reference history much(prenominal)(prenominal) as unforeseen medical deterrentup bills, their credit card was stolen, or on that point could be a mistake by the credit-reporting agency. These could entirely change the alliance s view on your credit. On the other hand, companies generally do non mean simply the credit standings in hiring. The family may similarly usage dry land tests and drug testing. Now that so many companies are using credit as a selection method, states pick up started to step in and consider prohibiting the use of an applicants credit in respect to hiring.There are quad states that do not allow the use of credit and eighteen more looking at illegalise it. States see this as discrimination found on credit history, or as a urbane rights issue since minorities generally have lower credit scores. Keep in mind that the caller-up has to have signed permission to get peerless credit score, so the applicant does not have to give permission. When one does go forward with the credit be given across, it is important for them to know that the order does not get their full report or even the scoring. There are many factors for wherefore a company may want to use credit. With so many companies having to deal with fraud and theft, it is easy to see why they are taking a proactive stance. Companies use the general legal opinion that people with deadly credit are more promising to err from them than those that do not. Unfortunately, there are no studies to support this reasoning, then leading to misconceptions of what could be a highly qualified applicant.1. How well do you turn over credit checks meet the goodness criteria of (a) reliability (b) validity (c) ability to generalize results (d) high profit and (e) legality? a. Reliability is something that can in some ways be determined in a credit check. passel and does this person pay their bills on time shows how reliable they are for payment. It does not, on the other hand, show ones reliability in the run lowplace. A credit check will not tell an employer if a person will be reliable to show up to work on time every day. The employer should understand that unreliable credit could be a result of a n unknown situation, thus not relying to heavily on one aspect of ones history. b. A credit check has little to no validity on someones willingness or ability to perform a job or task. It would be virtually impossible to determine if a person can do a job based on whether or not one pays periodical bills in a timely manner. A credit check doesnt determine I.Q., knowledge of sales techniques, or body strength, thus demonstrating there is no validity in measuring ones credit score to establish the ability to perform any job or task.An employer would be ill advised to use a credit check in consideration of the skill(s) need to perform in the work place. c. Credit checks are very generalizable when looking at hiring an individual for jobs dealing with gold. shadow a person who cannot be responsible for their own coin management, be responsible for a companys money? A company can generalize that an individual with a history of money problem could be more likely to steal and or comm it fraud. Generalizing can also create a false impression of a well(p) and responsible person. Credit checks do not explain the reasoning for their bad credit, such as identity theft or medical bills. slice it is easy to accept generalizations as a way to measure ones dexterity to theft, understanding the reasoning for the lack of responsible payment may succeed a more adequate insight into ones character. d. The utility or the cost of the credit check verses the benefit of the teaching discharge in the credit check differs in the job position.If the company were hiring for a low-level mail clerk it would not be cost effective to pay for the credit history, but if one is hiring for a Chief fiscal Officer than the utility would be high and would make economic sense. The company must consider the financial burden and weigh it against the validity of the information gained when using the credit checks as a hiring recourse. e. The legality of using a credit check for a tool for hi ring has be get very controversial, thus leading to the practice being banned in many states. There are currently 4 states, Hawaii, Illinois, Oregon, and Washington that ban the use of credit checks for pre-employment usage. There are 14 others states that have or are considering banning the use as well. There are other considerations of legality such does it cause discrimination or breaking theequal opportunity employment laws. Companies should look at every job independently and make sure the job on the noseifies the need for a credit check and that they meet all legal obligations in doing so.2. For what kind of jobs might a credit check be a useful selection method? For what kind of jobs would it be unhelpful, inappropriate, or wrong? A credit check might be helpful method of selection when hiring for a position that require managing money for a company such as an accountant. Companies may also reign it helpful when hiring a position that deals with the allocation of money, th e assessment of risk with the companys money or budgeting of company funds. A credit check might be telling of the candidates reliability with money and or their willingness to risk financial ruin. Checking of an applicants credit could be unhelpful, inappropriate, or unethical when hiring for jobs that have nothing to do with handling accounts or company money, such as a construction worker. It could unhelpful when prompting an employee that has been with the company for a substantial amount of time, this could make the employee discover untrusted and lead to lack of inscription to the company.It would be inappropriate to have a credit check run on a minor employee. He or she most likely has no credit history and may not understand what they are allowing the company to check. The practice could be considered unethical if the company is using this as a tool to discriminate against a minority or someone who is disabled. 3. Imagine you are an HR manager at a company operating in a s tate where credit checks of job applicants have been banned. What other selection methods could you use to pick honest and responsible employees? An HR manager could use selections methods such as honesty test, footing checks, and drug testing. One would also want to check references from past employers and educational institutes. It is also a good tool to have enough time with the applicant to get a sense of whom they are and conducting a working audience can help the discourseer to get a feel for the applicants. A situational interview could be helpful in determining how one might controvert in different circumstances.How Would a Manager from the Information in this quality?The information in this case could help managers weigh the need for credit checks in their personnel selections. They can reference the pros and consto the reliability, validity and utility of the credit checks as a device in hiring. Managers could also see that the generalizations that come with credit che cks may cause them to lose a very workable candidate. Managers will see from this case that credit history can be deceiving when all the information is not available to them. For example if the manager does not know that an applicants identity was stolen and that is why their credit appears to be poor than the manger could misjudge the person and lose out on a potentially great employee. The manager could also learn that doing credit checks could lead to prospective legal problems if not handled with care.There are many acts taken against companies for using credit checks as a selection method. do sure that laws are followed correctly and that the company does not discriminate against anyone can be tricky in the use of credit checks. Many feel that credit checks are discriminating because minorities tend to have lower scores than non-minority groups. No company wants that kind of allegation against them, thus the decision to use credit checks must be considered carefully. A manager could learn that plot credit checks are one way to decide on whom to wage it is not the only way and probably not the most just way.ReferencesArnoldy B. (2007). The spread of the credit check as civil rights issues. The Christian scholarship Monitor. Received from http//www.csmonitor.com/2007/0118/p01s03-ussc.html Johnston S. (2011). Can bad credit ruin your job count? Received from http//www.bankrate.com/finance/personal-finance/can-bad-credit-ruin-your-jobsearch.aspx Noe R., Hollenbeck J., Gerhart B.& Wright P. (2011). Fundamentals of Human Resource Management. (4th Ed.) New York. McGraw-Hill Irwin.Rosen L. (2011, April 5) 18 U.S. states consider legislation to limit credit checks for employment screening background checks. Blog. Retrieved from http//hr.toolbox.com/blogs/background-checks/18-us-states-consider-legislation-to-limitcredit-checks-for-employment-screening-background-checks-45600